Most investors instinctively know that investing and gambling are not the same thing. At the same time, they may find it difficult to articulate exactly why they are different. They are both often considered in a similar context — in fact, when asked to describe their personal investment strategy, investors sometimes resort to using gambling terminology. For example, they might mention “placing their bets” on particular stocks, bonds, mutual funds, “letting it ride” or even “doubling down” to increase their exposure to a certain investment. In the end, if they are lucky (or skillful), their bet will “pay off” and (hopefully) they will make some money. If not, they can always “cash out their chips” and go home. But can investing really be compared to gambling? If not, is there a better analogy that could deepen our understanding of investing in general?
